Consumption expenditure on different food items is generally used as a main yardstick for measuring the standard of living in developing nations. Study of temporal changes in consumption patterns provides an insight into status of welfare changes and is helpful in planning future investment decisions. In Ethiopia, since the mid 1990s there have been several efforts by the government to alleviate poverty at the national level. Thus understanding changes in urban consumption patterns provides valuable policy information on the effectiveness of policies designed to alleviate poverty. Accordingly, this paper investigates the phenomenon of changes in consumption expenditure in urban Ethiopia using two rounds (1994 and 2004) of household survey data from the Ethiopian Urban Household survey (EUHS) of ten food categories. The study employed Working-Leser expenditure share model to estimate income elasticity of demand and determinants of urban household consumption for Addis Ababa city and six major towns. The study also extended its analysis by running simulations for rise in per capita income. The results from the decomposition of per capita consumption into different demographic and economic factors confirm that urban household consumption patterns have started to shift from staple food grains to high value food products. The simulations and estimated income elasticity of demand for cereals, pulses and spices were found to be much lower than those of non-staple high value products. This transition in food consumption patterns in turn needs government policy intervention to stimulate production of food items with high demand.